What would the likelihood be of a bank approving a $5k loan for a 20yr old on an annual income of around $25k? What do they normally look at?
Annual income: $25k
Savings: $40k
Crypto: $8k
Annual expenditure: $6k
HECS: $34k
$5k Car Loan on $25k Income?
Comments
Hahaha
+1 agree - simply accounts for nothing in the eyes of lenders…
I've got a ticket for this weeks $40m. Means nothing! Could be $0, $16.45, $45,75, $255.55, $1284, $17k, $445, or $40m…
To them, it's worthless until it's of 'cash value'.
If I was the bank, I'd be asking why you are asking for a $5K when you have $40K in savings….?
I'm thinking to buy something worth $45K?
In which case, current asset seems irrelevant to an unsecured loan application?
Yeah fair question actually.
The $40k savings is what I'm accumulating to buy property in the future so I'd rather not touch it.
Was looking to get a new car next year and was thinking of saving $10k for it, selling my crypto, and taking out a $5k loan to pay for it.
It would make a lot more sense to pay cash. The interest rate on the loan will be higher than whatever you can get in a savings account. You will have less money overall taking out a loan than just paying cash. If you intend to still have the car loan when you buy a house, it will count against you and reduce your borrowing power. So there's no advantage.
Don't take out loans for depreciating assets. Your car is a depreciating asset.
A vehicle can be an income-producing tool that makes the loan financially justifiable.
@rektrading: I highly doubt it's being used as an income-producing tool in the OP's case. Happy to be proven wrong.
I highly doubt it's being used as an income-producing tool in the OP's case.
OP said he has a job. Unless it's 100% remote, he likely needs the car to get to work every day, even more so if he gets a better job in the future with longer hours. Ergo, it's helping him produce an income.
Public transport? He'll end up paying 40-60% of the car's value after just 1 year, with no asset to show for it.
This idea that you should only take out loans if it earns you profit in the future is just financial elitism.
@SlavOz: OP already has a 5k car. If they are getting a 5k loan but unwilling to touch the 40k, are they swapping a 5k car for another 5k car? Whats going on?
Normally lease what depreciates and buy what appreciates……
thinking of saving $10k for it
Do this then buy a car for $5k, you're 20 you don't need to spend much more on a car.
you want to take money out of an asset that can potentially 10x to buy something that will be worth 10% in 20 years?
If I was confident it would 10x then I wouldn't pull out. I never really thought of it as an investment when I got it. Idk maybe that'll change.
I got in pretty late like July this year.
@ajsr8: are you holding sh*tcoins or are you holding btc/eth
we are potentially about to enter the parabolic phase as we approach the end of the year once btc breaks 65k again
so you have been holding 3 months and don't have a lambo yet?
@redfox1200: Well I thought I'd at least be able to retire by now but I'm only $1.5k up:)
The initial plan was to hold throughout Q4, or whenever BTC hits $100k USD and then sell. Whether I actually sell, I'm not certain yet.
I put like $3k in BTC, $1.7k in ETH, $1.5k in SOL and the rest in some others like ADA, HBAR, VET etc. In hindsight, I probably should have put more of it into BTC but oh well.
we are potentially about to enter the parabolic phase
yeah but positive or negative parabolic ;)
Suggest you update your post about Car Loan as comment about secured loan is not meaningful.
Next is having a $5k car loan affects your serviceability of the home loan, so not touching the $40k saving for home makes sense if you are not taking a car loan.
Thanks fixed it.
If I did take out a car loan, I would have paid it off well before taking out any home loan which in itself is still a long time away.
@ajsr8: If you're going to pay it off before you get your house, why not pay cash. Otherwise you are paying the same amount except adding interest and fees on top.
@Quantumcat: Yeah I'll try and save the rest in cash instead of applying for a loan.
Might sound like a dumb question but wouldn't taking out a small loan help with purchasing a house in the future (i.e. in that it is evidence that you borrowed money and paid it back as opposed to applying for a future mortgage with no evidence of borrowing prior)? Or does that not matter?
@ajsr8: I can't answer that exactly, but you have a history of saving which is effectively the same thing.
Friends don't let friends take out car loans
Especially if you're on $25k a year and have savings.
If you can't afford the car, get a cheaper car.
At 25 i drove around a $2500 subaru, makes you appreciate the finer things when you do finally earn decent money
(having said that i bought an Audi and the mechanical issue costs alone would give your car a run for its money)
Your interest rate alone would be high.Pay your car down in cash, it's a depreciating asset.
Taking out a car loan while a car is depreciating is the equivalent (for your money) to setting yourself on fire and jumping into a tank of fuel.I wish I could go back in time and tell 22 year old me that buying a $20k car on a loan is a complete waste of money. Even though I was driving quite a bit it wasn't worth it in anyway at all. I had plenty of justifications to myself on why I did it, none of them held up.
Also, the $2k subaru I was driving around before that was awesome. Subaru Leone Royale with blue velour trim. I miss that car a lot more than the one I bought.
why you are asking for a $5K when you have $40K in savings
Because some people like getting paid 1.5% and paying out 3.9%.
Savings: $40k
unless this is earning you more than the interest on a $5k unsecured personal loan would be…. why would you get a loan?
Is that income from casual employment or permanent?
Casual - that would seem risky to issue line of credit to you. A year loan would require at least 400pm of repayment.
Permanent - maybe for a loan. Unlikely 5k credit card - it is much higher than your monthly income.
Asset - if you have 40k saving, I wonder why you want a 5k loan?
$15k comes from permanent part-time employment. The other $10k comes from casual income but its recurring on fixed days like permanent part-time, but without the fixed hours and leave benefits if that makes any sense.
Yeah not sure about the 10k casual income in eyes of the bank, mate. Especially is not fixed hours.
Fast approval with loan shark/mafia/bikies. But in case if you are unable to repay it back they will come after your body parts :D
He could prob get by with just 1 kidney maybe?
Or maybe they could break his non-dominant knee cap?I think I'd rather setup a GoFundMe page instead.
Or OnlyFans
Are you getting finance from the dealer or going to the bank to get a loan?
You're more likely to get finance directly from the dealer although some banks do allow easy car loans directly for apprentice tradies etc
Buy a cheaper car, or repair the car you currently drive(if you have one).
If you dont drive much, it might be cheaper to get ubers and public transport.
A car costs minimum $2k a year, before it moves. Rego, service, insurance.
Crypto: $8k
You can get as much as 95% LTV depending on the coin/token and earn interest on both lending and borrowing on some lending platforms.
I'm happy to give you quickly if that is something you like to learn more about.
Btw There is no credit checks, paperwork or banks sifting through your financials. The digital assets guarantee the loan on the platform.
If you really need that extra $5K to spend on a car, take it out of your savings.
No fees or interest payable or anything (and the interest you lose out from your deposit account would be absolutely nothing!), and you can put those "repayments" back in your savings accounts for when you want to buy a home.When I was 20 I blew 30% of my savings on a Corolla. It was old but it showed me a reasonable part of the world.
With 25 I was already married so we bought a brand new Corolla top of the line. Argued with 6 dealers for 3 weeks and accepted to pay for the power steering but no aircon.
Fitting the A/C at the first 1k service gave us another $100. Funny that that very dealer actually went broke. With 98,000km I fited the first broken part, a fuel pump, aftermarket $34.00 .
With age 30 the VN Commodore disguised as a Toyota Lexcen was the same price as a Corolla. Bottom end torque but after 10,000km the Corolla felt like a new car with 11 times the milage. Growing family meant a station wagon had to do. Swapped the Lexcen for a Subaru. Heaps of fun.Take my advice: ONLY ever borrow money on bricks and mortar!
Apply for a new credit card with a balance transfer to your existing credit card.
https://www.finder.com.au/credit-cards/balance-transfer-cred…
Ring the bank (do not do it electronically) of your existing credit card and ask them to move the $5000 from your credit card to the saving account you have with them. There should be no fee if you ring them.
Pay cash for the car.
Make payments on the new card such that you do not pay interest or fees. You need to factor in the establishment fee of the balance transfer (if any) and the annual fee (if any).
This will also create a credit history for you which you might lack at the moment.
If I was on the other end of the bank reviewing this application I would reject it before I even made my first cup of coffee for the day.
+$40K savings.
$5K loan.
No bank policy review needed. Reject and look at other applications, No need to sacrifice my employment review for potentially breaching responsible banking rules.If I was on the other end of the bank reviewing this application I would reject it
+$40K savings.
$5K loan.Why? What if someone wants to buy a $45K car?
The $40K in saving proves that the applicant has the ability to save and also shows his spending isn't over the top, therefore, should be able to service the relatively small loan quite easily. A $5K personal loan at a variable rate of 11.5% over a period of 5 years is only about $110/month. That's what people pay for their iphone plans these days.
Is there a reason you need to buy a new car?
In your situation I would dip into savings to pay cash for a sensible (Jap/Korean, cheap to run/service/insure/repair) 5-10k car and continue building your savings back up. Your figures indicate you are capable of saving 19k pa.
Nah not really. More of a want rather than a need. I already have a $5k car.
Was only going to get a new one if crypto took off but looks like I'll try and save for the remaining amount in cash instead of a loan.
save and pay cash
Perfectly fine to take out loan for a depreciating asset, in this case a car. IF you are able to get better returns with the $5k investing it elsewhere than you would've paid for the interest on the car loan. But if it's just sitting in your savings account at 0.5%, then you are better off paying in cash.
Anyway, good to see you diversifying some into crypto. Hopefully not in too many shitcoins.
I'd be using cash from savings and then diligently put into your savings what you world be paying in loan repayment - net gain to you. I doubt your savings earning is more than loan interest.
HEX $34k…. this is a debt for life. It is indexed to inflation, and every cent you make, a % will go toward paying off your debt.
And a 34k debt has only landed you a 25k job.
You can save 5k if you put your mind to it. Within the year you would have 5kin the bank.
That is a nice bag of HEX.
People can keep their taxable income under the threshold, continue to accumulate non-income producing assets to avoid paying back the student loan.
2021–22 repayment income thresholds and rates
Repayment income (RI) Repayment rate
Below $47,014 Nil
https://www.ato.gov.au/rates/help,-tsl-and-sfss-repayment-th…
Just sell your crypto and buy the car with that. It's less hassle and you won't have the bank on your back if your financial situation changes.
Selling the best-performing asset for fiat is smart as putting one's 🙌 in a blender.
A better way to access fiat is to lend the assets out using a lending platform, earn interest on the lending, borrow at a low-interest rate (in some cases a net neutral loan) and pay back the principal at the user's discretion.
Don't you think there'll be a big crash at the end of the 4 year cycle? Or do you expect it'll be a lot more stable onwards?
I don't know what will happen with digital assets in Q4.
What I do know is that fiat always go down to the right and digital assets will in the long term go up to the right.I'm 99.99% in digital assets and 0.01% in fiat.
The 0.01% fiat is for coffee.Being long on digital assets is the best way to short fiat to the ground.
25k income 550k+ median house prices. good times we live in
More like $1m lol
That's why I put the plus+ lol
Ah I see you live on the Gold Coast.
Pretty sure the median house price in Melbourne is actually $1m+
If it helps, I got a 15k secured car loan earning 35k a year when I was 20 and it went through just fine.
Lending criteria probably have changed since then (7 years ago) but they didn't question anythingAlright thanks for the responses.
Figured I'm just going to take on more work over the summer and pay everything with cash.
Yeah and exciting times ahead.
Well if they approve it the rate is probably not going to be fantastic
also
Right now maybe 8k, might be 7, or 9, or 0 or 100 by lunchtime lol.